By Scott Wooldridge
Last night’s DeviceTalks: Minnesota event in Minneapolis highlighted the risks and rewards of medical device entrepreneurship, contrasting the arcs of Kips Bay Medical (OTC:KIPS) and Aum Cardiovascular.
Kips Bay founder & CEO Manny Villafaña, the medtech legend who started Guidant and St. Jude Medical (NYSE:STJ), told MassDevice.com publisher Brian Johnson that the company’s wind-down was precipitated by a tough financial landscape and regulatory environment. Villafaña this week stepped down as CEO, and the company’s shareholders and board have approved its dissolution plan.
“I just spent 8 years in development of what I feel is a great technology, but I didn’t anticipate the regulatory path would be so difficult,” Villafaña said. “The FDA kept requiring more and more. And every time they raise the bar on you, that’s another $10 million to $15 million.”
Part of the problem, he said, was that the company started in 2008, when it was very difficult to come up with capital due to the recession. “We raised some money, but it wasn’t enough,” he said.
Villafaña said the Kips Bay setback was difficult, but he’s already working on founding a new venture.
“I’m not ready to retire; I love what I do and I still have the energy,” he said. He told the story of watching a heart transplant at a hospital in Spain, and seeing the old heart sitting on a table still beating, only to stop at the exact moment the new heart began beating in the patient’s chest.
“I turned to the guy next to me and said, ‘When golf is as exciting as that, I’ll take up golf,'” he said.
The fine line between success and failure was illustrated by another story Villafaña told last night.
“Very few people know that at 1 moment the FDA came in and said, ‘We’re shutting down St. Jude,'” he said, explaining that physicians in the field came to his company’s defense, and in the end the FDA relented.
Villafaña, who grew up in Brooklyn not far from Yankee Stadium, also cited baseball great Mickey Mantle, who set a record for strikeouts and was sent down to the minors not once but twice.
“Don’t be afraid to swing the bat,” Villafaña said. “Yes, our company closed, but not because we failed at our work. Our work was good. We were proud of our work.”
Villafaña was followed by Aum Cardiovascular founder & CEO Marie Johnson, where the company’s success is grounded in tragedy. Aum makes a low-cost cardiovascular test using its Cadence device that rivals nuclear stress testing in diagnosing possible cardiovascular disease. Johnson began working on the problem after her husband, who was given a clean bill of health after a traditional stress test, died of sudden cardiac arrest.
“I had 2 young children,” she said. “I knew right then I was going to work on eradicating this terrible disease.”
Johnson said she’s not your typical med-tech innovator.
“I didn’t even know how to say the word ‘entrepreneur,'” Johnson said, noting that she gave her first effort in medical technology, a computerized stethoscope, to the University of Minnesota, which patented it and made the idea available to med-tech startups.
“Nobody could see the vision,” she said. “It sat there for years.”
When the university agreed to give her back the patent, she went out and used a relatively small grant from the federal government to start up her own company.
Johnson said it was Villafaña, a mentor of hers, who suggested using private placements to fund her vision by raising money from individual donors.
“I raised about $10.3 million using that method,” she said, adding that her donors saw that the technology she had developed was effective. Aum pulled in a $5 million round over the summer.
“They don’t give you money because they’re in love with the story,” she said. “They funded this because they saw that we could detect obstructive coronary disease with an easy test, and with no pharmaceuticals. It was a no-brainer.”
The low cost of her technology is also a factor. Tests with Aum’s Cadence device cost $100, compared with the $5,000 tab for nuclear stress tests.
Aum Cardiovascular is now conducting clinical trials in Europe and the U.S. and is in the process of moving to a new facility (the company’s current site is stuck between a McDonald’s and a furniture store, Johnson said).
“Our goal is to ramp up in a way that makes sense,” she said, adding that as the company has grown, she’s had to learn to delegate.
“It’s pretty tiring to do a job like this,” Johnson said. “I’m learning to let other people take things on.”